Case 7: The Future of Drug Salespeople

Some of the most highly trained, skilled, and best-paid salespeople in the United States work for pharmaceutical companies. They are called detailers because they provide the details about new drugs to doctors and their support staff, and there are about 100,000 of them. But in recent years, the big drug companies have been accused of allowing their detailers to provide expensive kickbacks to doctors, such as vacations and other promotional gifts, with the expectation that the doctors will prescribe and promote their drugs. It is very clear that a number of new regulations will be introduced over the next few years by the Food and Drug Administration (FDA) and various states to control such expensive practices that make the drug market less efficient. In general, doctors say they would like to see fewer reps and lower promotional spending by the pharmaceutical companies. But specifically, they take the kickbacks.

Questions

1. How does the above high promotional spending on doctors make innovation and the evolution of the drug market less efficient? What happens to Drug company behavior, Doctor behavior, Patient behavior?

2. The FDA is considering requiring the drug companies in their drug trials to test their new drug not only against a placebo treatment but also against the highest-selling competitive product (alternative treatment) in the marketplace. See Infect-prevent mini case. Their advertising and their detailers would only be able to make claims of product performance superiority if their drug did significantly better than the current best-selling drug in the market. The FDA would provide a database of best performing drugs for treating various illnesses based on objective performance measures. If drug companies make superiority claims without the support of objective trial evidence, the drug companies and their detailers would be prosecuted by the federal Trade Commission for deceptive practices, subject to triple damages claims from rivals, and also criminally prosecuted for fraud

What effect would such a law have on drug detailing and the numbers and quality of drug detailers?